As the Asia session progressed, the dollar experienced a broad uptick in demand, with the USDCNH pair breaking higher and defying initial resistance at 7.12. The consistent buying pressure was likely fueled by stops in the market, pushing the pair towards 7.13 New York opening levels. As we approach the next resistance level of 7.1450/7.15, it’s possible that we may see further upside movement and a reduction in short positions.

Despite the bullish momentum, there has been little reaction in the curve front end, with cash remaining soft ahead of Golden Week. Offshore markets have seen predominantly LHS rolls as well as interim demand in the 6m area onshore. However, continuous outright buying could lead to front-end paying cares towards Dec IMM paying intraday, causing the desk to prefer avoiding positions around these levels in the near-term.

The breakout of USDCNH has potential implications for the broader market, with a stronger dollar potentially on the horizon. As traders and investors assess the likelihood of further upside movement, it’s important to keep an eye on key technical levels and fundamental drivers. With the Chinese yuan facing increasing pressure, the USDCNH pair may continue to attract attention in the coming days and weeks. Stay tuned for updates and insights from UBS S&T as we navigate this dynamic market environment.